How CPP Payments Change By Start Age: Comparing Monthly Amounts Up To $1,760

Canadians get a lot of their retirement money from the Canada Pension Plan CPP. But the age at which you start collecting CPP is one important choice that can greatly affect how much you get each month.

CPP Payments Change By Start Age

In the next few years, people who qualify for enhanced CPP rules will be able to get up to $1,760 a month. When you start receiving benefits can make a big difference in how much money you get each month for the rest of your life.

It’s important to know how CPP payments change by start age as payment dates get closer and retirees plan their income streams. This in-depth guide explains how the system works, how much you could get at 60, 65, or 70, and how to figure out which option is best for your finances.

Getting to Know the Basics of CPP

The Canada Pension Plan is a retirement plan that you pay into. You and your employer put a percentage of your earnings into CPP every year that you work. You pay both parts if you work for yourself.

Your retirement benefit is based on:

How much you gave
How long you helped out
Your average pay while you were working
The age at which you begin to get payments

You don’t automatically get CPP when you retire. You have to apply, and you can start getting benefits at any time between the ages of 60 and 70.

The “normal” age for CPP is 65. If you start before age 65, your payment will be lower. It goes up after 65.

The Most You Can Get in CPP Each Month

Every year, the maximum monthly CPP retirement pension goes up because of inflation and improvements to the program.

Under the improved CPP system, new recipients will be able to get up to $1,760 per month in retirement benefits in the future for those who:

Always gave at least the maximum amount
Worked for most of their adult lives
Start making payments when you turn 70.

Most Canadians do not get the most money, which is something to keep in mind. The average monthly CPP payment is a lot lower. But knowing the maximum helps show how strong the start-age choice can be.

Starting CPP at Age 60: Lower Payments

You can start CPP when you turn 60. But your monthly payment will always be lower.

The rate of decrease is:

0.6 percent every month until age 65
7.2% each year
If taken at 60, it could lower by as much as 36%.

If you were 65 years old, your benefit would have been $1,200 a month. Starting at 60, it goes down by 36%.

For example: $$768 per month is 36% less than $1,200.

If you thought you would make $1,400 a month at 65, starting at 60 would cut that down to about $896 a month.

The difference is even bigger for someone who can get the higher maximum of $1,760 at age 70 if they take it early.

The Standard Benchmark: Starting CPP at Age 65

The baseline is age 65. There is no bonus and no reduction.

If you meet the requirements for: You get $1,200 at 65.1,400 at 65 means you get $1,400. 1,500 at 65 means you get $1,500.

This is the point of reference for figuring out increases or decreases.

Many retirees choose 65 because it fits with how retirement planning has been done in the past and how to qualify for Old Age Security.

Maximum Increase for Starting CPP at Age 70

If you wait to get CPP until after age 65, your benefit goes up by:

0.7% every month
8.4% every year
If taken at 70, it could go up by as much as 42%.

That rise will last forever and apply to everyone.

For example:

If you get $1,200 a month in benefits at 65,

Increase of 42 percent equals $504.

At 70, the new monthly payment is $1,704.

If you get $1,400 at age 65:

$588 for a 42% increase

The new monthly payment at 70 is $1,988.

However, there are program maximum limits, so the higher cap in the next few years is expected to be around $1,760, depending on how much you have contributed in the past.

Monthly Comparison by Age at Start

Here is a simple example with a $1,300 benefit for someone who is 65 years old:

About $832 a month at age 60
At 65, it’s $1,300 a month.
At 70, it costs about $1,846 a month.

Now let’s look at an example with a higher contributor:

Age 65 benefit of $1,500:

At 60: $960
At 65, $1,500
At 70, about $2,130 (but only up to the program’s maximum limits)

In some cases, the difference between starting at 60 and 70 can be more than $1,000 a month.

Comparing Lifetime Income

It’s not just about the monthly payments when you decide when to start CPP. It’s about all the money you’ll make in your life.

If you start early, you get payments for a longer time but for less money.

If you wait, you’ll get fewer total payments, but they’ll be at a higher monthly rate.

The break-even age is usually between the late 70s and early 80s. If you live into your 80s or 90s, putting things off often means you will make more money over your lifetime.

Things to Think About Before Starting Early

If you start CPP at 60, it might make sense if:

You need money right away
You are worried about your health.
You think your life will be shorter.
You stopped working and don’t have any other income.

But you need to think carefully about the permanent cut. Once you start, you can’t go back to the higher rate after a short cancellation period.

Why you should wait until you’re 70 to get CPP

If you wait, it might be good if:

You are still busy at work.
You have other ways to make money.
You think you’ll live into your 80s or 90s.
You want to make more money later in life that is guaranteed.

The rise is like a guaranteed return, but it takes inflation into account. That security is important to a lot of retirees.

How Inflation Affects CPP

Every year, the amount of CPP payments goes up with inflation. This means that your benefit will go up every year after you start getting payments, based on the Consumer Price Index.

If you wait and start with a higher base amount, those annual inflation adjustments will apply to a bigger number, which will give you a bigger advantage over time.

The Improved CPP Effect

Recent changes to the CPP raised the amount people have to pay in and the benefits they will get in the future.

Younger workers and those who contribute the most to the enhanced program will get more money in retirement than people in previous generations.

This is one reason why future retirees who wait until they are 70 years old to retire will get close to $1,760 in maximum payments.

CPP and Other Benefits for Retirement

CPP works with:

Supplement for Guaranteed Income for Old Age
Pensions from employers
Taking money out of an RRSP or RRIF

The age you start can change how these programs work together.

For instance:

OAS starts at age 65 (unless you put it off)
If your CPP income is high, your GIS may be lower.
If you get more CPP at 70, you might not be able to get GIS.

It is very important to coordinate carefully.

Things to think about when it comes to taxes

You have to pay taxes on CPP payments.

If you have other sources of income, your monthly payments at 70 could put you in a higher tax bracket.

Starting earlier can sometimes lower your overall tax burden by spreading out your income more evenly.

Every plan for retirement is different.

Things to think about for survivors and people with disabilities

The age at which you start can also affect survivor benefits.

Your spouse may be able to get a survivor’s pension if you die. The calculation takes into account how much you get in benefits and how old you are when you die.

A higher base CPP can mean better protection for survivors.

The Emotional Part of the Choice

There is a psychological aspect in addition to maths.

Some retirees would rather get their payments sooner because they feel like they are being rewarded for years of work.

Some people would rather have the most security possible in their later years, when healthcare costs may go up.

There is no one answer that works for everyone.

When to pay and how to apply

CPP doesn’t happen on its own. You have to apply.

It can take weeks to process. Payments are made once a month on the dates set by the federal government.

As the next payment cycles get closer, people who want to start benefits should apply several months ahead of time to avoid delays.

Important Things to Know About the CPP Start Age

Beginning at 60:

Less money each month
Longer time to pay
Long-term cut

Beginning at 65:

Payment in full
No bonus or penalty

Beginning at 70:

Monthly income can be as much as 42% higher.
Less total payments
More long-term safety

There can be a big difference between 60 and 70, with high contributors possibly paying more than $1,000 a month.

You have to make a decision about CPP for the rest of your life. Once you start, your monthly payment stays the same, except for inflation.

The choice of when to pay has real financial effects, since the highest contributors who wait could end up paying up to $1,760.

Before you make a choice:

Look at your history of contributions
Realistically guess how long you will live
Think about your health, job, and other sources of income.
Take into account taxes and spousal benefits.

As payment dates get closer and retirement plans become clearer, taking the time to carefully think about your start age could mean the difference of tens of thousands of dollars over your lifetime.